“My objective is to avoid Italy being penalised in a way that hurts our country and risks also hurting Europe,” Conte told Italian daily Avvenire.

“I’m finalising a proposal that the European Union will have to take into consideration. It will be ready in the coming hours.” The draft “does not compromise Italians’ interests or the promised reforms” of the populist government.

“I have some projections on the economic impact of the ‘100-quota’ (pension reform) and citizens’ income. This can give me room to manoeuvre to spend and use in negotiations” with the Commission, Conte said.

The European Commission in October rejected the big-spending budget submitted for approval by the coalition government of the far-right League and the anti-establishment Five Star Movement.

The budget includes giving a state pension to anyone whose age plus number of years worked equals 100. It also provides for a universal basic income of 780 euros for the least well-off to help them get back into the job market.

Conte declined to provide any figures for the new budget. EU officials last week said that a reduction in Italy’s public deficit to 2.2 percent — from the proposed 2.4 percent — would still be insufficient to avoid EU sanctions.

“We are not disputing the pension reform, the choices of the Italian government, because it’s up to the Italian government to make its own policy choices,” said EU economics affairs commissioner Pierre Moscovici after talks with bloc finance ministers in Brussels.

He spoke after ministers on Monday formally agreed with the commission’s rejection of the Italian budget, but also urged for caution.

“The only thing where we cannot take any risk whatsoever is to enter a dead-end in which we don’t have channel for dialogue,” said Eurogroup chief Mario Centeno, who is also Portuguese finance minister.

If agreement is not reached, Italy could find itself the target of an EU excessive deficit procedure, which could ultimately lead to fines of up to 0.2 percent of the nation’s GDP.
The current government proposal for a budget deficit of 2.4 percent is considerably higher than the 0.8 percent the previous centre-right government had planned.

Brussels says this would only add to Italy’s already massive debt burden — currently more than 130 percent of GDP — and not deliver the growth promised after years of austerity.